...Page 1 FOCUS - 1 of 3 DOCUMENTS Mondaq Business Briefing November 7, 2006 Canada: Why Bernie Ebbers is Serving a 25-Year Jail Sentence BYLINE: By Garfield Emerson LENGTH: 6613 words 1. Background On September 26, 2006, Bernard J. Ebbers ("Ebbers"), the former Chief Executive Officer of WorldCom, Inc. ("WorldCom"), reported to a federal prison in Oakdale, Louisiana, to begin serving his 25-year jail sentence from his conviction by a jury on nine counts of conspiracy, securities fraud and related crimes related to the bankruptcy of WorldCom in July 2002. Ebbers' appeals from his conviction and 25-year jail sentence were dismissed by the United States Court of Appeals for the Second Circuit on July 28, 2006.1 In its decision upholding the jury conviction and the 25-year jail sentence imposed by the trial judge, the Court of Appeals for the Second Circuit commented that Ebbers' actions that were specifically intended to create a false picture of profitability for WorldCom were "motivated by his personal financial circumstances".2 Ebbers personal finances imposed significant pressures on him to ensure that the WorldCom stock price did not fall and that WorldCom's guidance of its future financial performance and investors' expectations were met. Ebbers was a wealthy man with a significant personal business empire outside WorldCom. He had also accumulated millions of shares of WorldCom stock. However, he had borrowed over $400US million from banks, using his stock in WorldCom...
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... Capital One 2 1. Identify and describe the key environmental forces that have immediate strategic implications for Capital One. There are many key environmental forces that have an immediate strategic implication for Capital One. First, the credit card industry has reached a high level of competition. This is a period of mergers and consolidations. Some institutes are selling off their credit card portfolio, others merging operations you might say that the industry is undergoing a period of flux. Secondly, the rise of personal bankruptcies has a direct barring on the credit card portfolio of Capital One. Thirdly, the economy; when the economy is in recession many things have a direct bearing on Capital One. Employees lose their jobs and fall behind on their credit card payments, this directly affects cash flow. Credit card holders may file for bankruptcy thus resulting in a bad loan discharge or times are just hard and are late paying their credit card payments. Capital One also faces a potential risk from its practice of funding from securitization. Capital One had to shift away from sub prime loans to a larger portion of prime loans as a result of federal regulations and many individuals defaulting on their loans. Each of these forces has a direct bearing on the operations of Capital One now and in the near future. 2. Identify and describe the capabilities and weaknesses within Capital One that have immediate strategic implications...
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...after tax (a.k.a. NOPAT, net operating profit after tax)(EBIT)(1-T) • the tax shield on Capital Cost TCCA • Incremental net working capital requirements NWC • incremental long-term assets Capex. At the end of the study period we also have estimates of cash inflow from sale of residual assets (RV), or the present value of FCFs which extend beyond the study period called continuing value (CV) RSM 2301 Financial Management - Fall 2011 © Asher Drory All rights reserved 9- 3 Valuation Alternatives: NPV vs. APV Models Net Present Value (NPV) NPV Expansion Decisions 9- 4 t t 0 FCFt (1 k )t Where: k = WACC keu is unlevered equity return (i.e., the equity return of an equivalent unlevered firm) T is the corporate cash marginal tax rate Vd is the value of debt Note: NPV ≡ APV by definition Adjusted Present Value (APV) APV t FCFt TVd (1 keu )t t 0 The static NPV model discounts FCF by WACC • The analyst...
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...Air Canada Evaluation Executive Summary Air Canada is a full service airline company with the largest market share in the Canadian market making it the largest airline in Canada and 15th in the world. I don’t recommend lending Air Canada due to: * Weak industry conditions * Poor historical performance/financial health * Risk factors assessment * Poor credit ratings Summary of Main Points The airline industry is a very volatile industry with a lot of uncertainties. Based on Porter’s five forces, companies in the airline business are faced with challenges such as threat of new entrants, high buyers power, high suppliers power, availability of substitutes, and intense competition. Historical operating results are poor. The company has been having continuing losses since 2008. Also, financially it is not healthy. Air Canada leverage ratio is very high, and obligated to significant debt due to pension fund, employees’ benefit, and orders of new crafts. Labor strike is a major risk factor. Recently, the company was faced with several strikes that caused many flights delays or cancelations. Negotiation is taking place between the company and labor unions. Outcome this negotiation might result in higher labor cost preventing the company from enhancing its cost structure. According to S&P, Air Canada credit rating is B-, which is a non-investment grade. Also, Moody’s downgraded the company from B3 to Caa1 due to its debt obligation and high...
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...History Canada was seeing as one the countries that are industrialized in the 1930s but didn’t have a national airline for the country but they did have a bush airline that were regional in the country at the time and the Canadian Pacific held part ownership in the Canadian Airways (CBC) The regional airlines were serving the transported mail and mining communities but the airline didn’t provide a service between the Atlantic and pacific oceans which made it hard for people to travel to these areas. In 1935 Mackenzie King came into power and he created the Transport department and Clarence Howe was appointed to be Air Canada architect and be the minister (CBC). Clarence Howe wanted to the airline to be put under the control of the government and he wanted it initially to be private enterprise to have a role in it. In 1936 Trans Canada Air has been legislated on this year and it was a Subsidiary of CNR and then it was turn to be owned by the federal government of the country (CBC). The Trans Canada Air lines have started their airline with only five million dollars and this help pay for the three airplanes that it was from the Canadian airways and they have hire executives that are from the U.S. airlines(cbc). In 1937 the Trans Canada Air has set forward on its inaugural flight and the flight between going to Seattle and Vancouver round trip would only cost $14.20(Cbc). Canadian Pacific gave an idea to the government for Canadian airways that it...
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...Debenture 1 Debenture A debenture is a document that either creates a debt or acknowledges it, and it is a debt without collateral. In corporate finance, the term is used for a medium- to long-term debt instrument used by large companies to borrow money. In some countries the term is used interchangeably with bond, loan stock or note. A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital.[1] Senior debentures get paid before subordinate debentures, and there are varying rates of risk and payoff for these categories. Debentures are generally freely transferable by the debenture holder. Debenture holders have no rights to vote in the company's general meetings of shareholders, but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures. The interest paid to them is a charge against profit in the company's financial statements. Attributes • A movable property. • Issued by the company in the form of a certificate of indebtedness. • It generally specifies the date of redemption, repayment of principal and interest on specified dates. • May or may not create a charge on the assets of the company.[2] • Corporations often issue bonds of around $1000, while government bonds are more likely to be $5000. ...
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...Montreal, Quebec, in 1964 where its corporate headquarters remain today. It has grown to become a worldwide corporation, with over 950 stores under 8 retail banners: ALDO, ALDO Accessories, Spring, FeetFirst, Globo, Little Burgundy, Lōcale and Call it Spring. There are also ALDO outlet, ALDO Kids, ALDO Liquidation, Spring Liquidation, and clearance stores. Canadian, American, and UK stores are corporate stores while international stores are franchisees. The company once operated the now closed or re-branded banners Simard & Voyer, Pegabo, Transit, Stoneridge, and FIRST (Which was the American version of Feetfirst). Statistics: Public Company Incorporated: 1942 Employees: 500 Sales: C$202.14 million (1996) Stock Exchanges: Toronto Montreal Ticker Symbol: AO.A SICs: 2337 Women's, Misses', & Juniors' Suits, Skirts, & Coats; 2321 Men's & Boys' Shirts, Except Work Shirts; 2325 Men's & Boys' Separate Trousers & Slacks; 2329 Men's & Boys' Clothing, Not Elsewhere Classified; 2331 Women's, Misses', & Juniors' Blouses & Shirts; 2335 Women's, Misses', & Juniors' Dresses; 2339 Women's, Misses', & Juniors' Outerwear, Not Elsewhere Classified; 2361 Girls', Children's, & Infants' Blouses & Shirts; 2369 Girls', Children's, & Infants' Outerwear, Not Elsewhere Classified; 2221 Broadwoven Fabric Mills-Manmade Company Perspectives: Algo Group's mission is to be a recognized leader in the fashion industry in Canada, the United States and Europe. We will...
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...operations in Ulsan, South Korea. This unit has an annual production capacity of 1.6million units. Ulsan is the world’s largest automobile manufacturing plant. The company had its first model, the Cortina released in 1968. This was in corporation with Ford Motor Company. The company has since grown and is now one of the top 100 most valuable brands worldwide. In Canada, Hyundai Auto Canada Inc. was opened in 1989. It is a subsidiary of the Hyundai Motor Company. It was located in Bromont Quebec. The Bromont plant only operated for four years before failure. Hyundai Auto Canada Inc. operates without a plant. There are however plans to revive it since there was a boosts in sales in the year 2009. Hyundai Motor Company is currently run by Chung Mon-koo who is both the chairman and CEO of the motor company. The company says that its goal is not to become the biggest car company; rather it is to provide value for the future. This also doubles as the company’s vision statement. (worldwide.hyundai.com) Production The main products for Hyundai Motors Company are cars. The company produces brands such as Accent, Elantra and Veloster in Canada. There are also SUVs that Hyundai motors Company produces. Their target market is mostly people on a low budget but who would like all the accessories that a car owner needs. This is mostly the middle class population. Their target market is mainly people aged between 35 and 45 years of age who need a cheap and well equipped...
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...The 2008 Collapse of Chrysler Melinda A. Dobson MGT 435 Organizational Change Robert Hamamoto November 18, 2011 The 2008 Collapse of Chrysler Beginning in the late half of 2008, a global recession hit the economy of the United States. With a combination of several years of declining automobile sales and the limited availability of credit led to a more widespread crisis in the United States auto industry in 2008 and 2009. Soon after the dramatic decline in sales, the U.S automaker, Chrysler, requested emergency loans from the government in order to stay afloat. In 2009, Chrysler’s situation had gotten worse and was faced with imminent bankruptcy and liquidation. With that being said, I would like to discuss the changes that have been implemented to Chrysler, identify new changes that still need to be implemented and assess the effectiveness of the change and the potential benefits of the new changes. Chrysler is an American automobile manufacturer that has built automobiles since 1925 and was the second largest automaker between 1936 and 1949. After a merger with Daimler-Benz Corporation in 1998, Chrysler was part of the German based DaimlerChrysler now known as Daimler AG. Chrysler suffered from poor management and lack of investment until 2007 when the company was sold to Cerberus Capital Management. Under DaimlerChrysler, the company went by the name of “DaimlerChrysler Motors Company LLC,” with its U.S operations referred to as the “Chrysler Group.”...
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...Motors Co. (NYSE:GM, TSX: GMM) and its partners produce vehicles in 30 countries, and the company has leadership positions in the world's largest and fastest-growing automotive markets. General Motors, the world's largest auto manufacturer, makes cars and trucks, with brands such as Buick, Cadillac, Chevrolet, and GMC. GM also builds cars through its GM Daewoo, Opel, Vauxhall, and Holden units. Financing and insurance activities are conducted by Ally Financial (formerly known as GMAC), of which GM owns about a 10% stake. Throughout its financial woes, GM has received billions of dollars in loans from the Canadian and US governments, negotiated concessions with labor unions, and jettisoned brands. The auto giant went through a six-week bankruptcy protection in 2009; it issued an initial public offering and returned to the stock market in 2010. General Motors was founded on September 16, 1908, in Flint, Michigan, as a holding company for Buick, then controlled by William C. Durant. At the turn of the 20th century there were fewer than 8,000 automobiles in America and Durant had become a leading manufacturer of horse-drawn vehicles in Flint, MI, before making his foray into the automotive industry. GM's co-founder was Charles Stewart Mott, whose carriage company was merged into Buick prior to GM's creation. Over the years Mott became the largest single stockholder in GM and spent his life with his Mott Foundation which has benefited the city of Flint, his adopted home. It acquired...
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...Today’s present forces of globalization have had an unmistakable affect on the local newspapers. Larger companies in particular, are slowly overtaking local newspaper businesses in Canada. In 1990, 17.3% of daily newspapers were independently owned, whereas in 2005, the number had dropped to 1%. With such a drastic shift to the near monopoly of media conglomerates controlling the newspaper industry’s inevitable economic and political problems arise. Thus, governments should support local newspapers to the extent that it is economically reasonable. Resultantly, this action will lead to a diversified media economy, preservation of accurate local viewpoints, and the maintenance of ideological democracy in Canada without creating an unnecessary burden on the Canadian government. By supporting local newspapers with reasonable subventions, the competition between companies will increase. The existence of a free-market environment forces companies to produce quality newspapers instead of the stagnation brought upon by the “monopoly company mindset”. From an economic standpoint, the existence of multiple companies also allows for a leeway for failure. The bankruptcy of a media outlet that services a large portion of the population would be dangerous. Responsive government intervention to restore the company or substitute the newspaper would be an unnecessary cost. A further result would be the immediate limitation of the people’s “right to information”. As government is divided into...
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...Capital One is a diversified bank that offers a broad array of financial products and services to consumers, small businesses and commercial clients. A Fortune 500 company, Capital One has one of the most widely recognized brands in America. As oneRichard D. Fairbank is founder, Chairman and Chief Executive Officer of Capital One® Financial Corporation. Capital One, headquartered in McLean, Virginia, offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Mr. Fairbank founded Capital One in 1988 based on his belief that the power of information, technology, testing and great people could be combined to bring highly customized financial products directly to consumers. Since then, Capital One has emerged as one of the America's largest consumer franchises with approximately 45 million customer accounts and one of the nation's most recognized brands. As one of the nation’s top 10 largest banks based on deposits, Capital One, N.A. and Chevy Chase Bank, F.S.B. have approximately 1,000 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia, and the District of Columbia. Question 1: Identify and describe the key environmental forces that have immediate strategic implications for Capital One. Capital One has become a strong leader in the financial world since its start as a public credit card company in 1994 through with strategic growth and diversification. I feel the key environmental forces...
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...This segment would be the plastics containers that would have potential. Other option is whether to acquire Continental Can Canada or not. The company generates $400 million in sales per year and it is the largest manufacturer in the Canadian region. That does not seem a whole lot. However, Continental’s USA business has estimated revenues of $1.3 billion which would double the size of Crown’s domestic operations. Also, Continental’s European operations generated estimated sales of $1.5 billion. Potential bidders for the acquisition are the major competitors of CCS. Avery is concerned about both options because they both have pros and cons. Entering the plastic can business segment would have the following pros: • Entering a new business segment, great for diversification • Decreasing shipping cost because of lighter weight • Made of natural resources • Plastic material can easily be formed/shaped Entering the plastic business segment would have the following cons: • Unknown business territory, no experience • Carbonation leaks after 4 month – major issue • Cannot be fully recycled Acquiring Continental Can Canada would have the following pros: • Double in size domestically, increase market share rapidly • Plastic container line would come from this factory • Expansion globally • Increasing bargaining power Acquiring Continental Can Canada would have the following cons: • Bidding war could create too high acquisition price • Conflict with different cultures •...
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...If farming is not something you think about everyday, it should be. Farming is a necessity to live and eat, yet a huge part of it has become at risk for extinction one day. Daily, small family owned and operated farms are being put out of business by corporate farms. Many small towns and schools depend on these farms, yet new federal legislative bills have done nothing to help these families or their farms. Multiple places are being forced into bankruptcy or retirement as prices continue to rise, but payment to these farms stay the same or even shrink. Government at local, state, and federal levels should help family farms through assisting new farms and helping to create or save trade revenue. In the editorial, “How Iowa can save the family...
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...Baluyot, Krishia Mae E. BSAV-2A Scandals that Rocked the Accounting World ❖ Enron Scandal The Enron Corporation led to bankruptcy Last October 2001. It is an American energy company based in Huston, Texas, and the termination of Arthur Andersen, which was one of the biggest audit and accountancy partnerships in the world. Enron is also attributed as the biggest audit failure. Enron was founded in 1985 by Kenneth Lay after merging Houston Natural Gas and Inter North several years later. When Jeffrey Skilling was hired, he developed a staff of executive that, with the use of accounting loopholes special purpose entries, and poor financing reporting, were able to hide billions in debt from failed deals and projects. Shareholders lost nearly $11 billion when Enron's stock price, which hit a high of US$90 per share in mid-2000, plummeted to less than $1 by the end of November 2001. The U.S. Securities and Exchange Commission (SEC) began an investigation, and rival Houston competitor Dynegy offered to purchase the company at a fire sale price. The deal fell through, and on December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Enron's $63.4 billion in assets made it the largest corporate bankruptcy in U.S. history until WorldCom's bankruptcy the following year. Many executives at Enron were indicted for a variety of charges and were later sentenced to prison. Enron's auditor, Arthur Andersen, was found guilty...
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